Conditions for low cost green hydrogen production: mapping cost competitiveness with reduced-form marginal effect relationships

Author name: 
Longden, T.
Jotzo, F.
Loeschel, A.

Green hydrogen holds promise as a zero-carbon energy carrier if production costs fall low enough to achieve cost-competitiveness with alternatives. We specify reduced-form marginal effect relationships that capture the underlying dynamics of existing structural models of hydrogen production via electrolysis. These specifications provide the marginal effect of electricity costs, electrolyser capital costs and capacity utilisation factors on the cost of producing hydrogen. And we use them to identify the potential combinations of cost components that meet threshold production costs under which green hydrogen will be cost-competitive. In the near-term, there is particular promise for low cost green hydrogen production where electrolysers are co-located with renewable energy parks to use electricity that would otherwise be curtailed. Or when they operate during periods of low or negative prices in electricity grids. Green hydrogen stand-alone operations could be commercially viable with continued reductions in renewable energy generation and electrolysers.

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